Why Zomato IPO Could List At Premium

Why Zomato IPO Could List At Premium

Today, i had a chance to look at Zomato‘s #redherringprospectus for an #IPO of up to Rs 8,250 crore after its investor Info Edge India Ltd chooses to exit. After reading the prospectus, i believe that this IPO would be a success:

1)Zomato focuses on growth at the expense of cash burn as operating revenues have nearly doubled to Rs 2604.7 crore from Rs 1312.5crore in the previous fiscal. 90% of operating revenues come from advertisements and subscriptions offering Zomato Gold.

2)COVID has been favourable to Zomato as it reported its highest quarterly gross order value (GOV) at Rs ₹2981 crore, mainly on the back of the significant digital shift following the pandemic.

3)The monthly burn rate decreased from $50 million in 2019 to less than $1 million in 2020.

4)Zomato has improved its unit economics and #contributionmargin. Discounts have decreased 66% per order, commission rates improved by 44%, and it earns 75% more per order as delivery charges.

5)Zomato’s acquisition-led growth has favoured its growth rates, with the company closing 20 deals in the last eight years, the biggest being its #ubereats deal at $206 million.

I believe Zomato’s timing for the IPO would favour its subscription price.